Workers Shouldering the Erosion of Employer Coverage

September 7, 2006

Authors

Karen Davis

Working hard is no guarantee of health insurance in this country. The number of uninsured Americans climbed to 46.6 million in 2005, according to the most recent U.S. Census data, an increase of 7 million since 2000. Nearly all the growth in the uninsured population is due to a decline in employer-based coverage, so most of the newly uninsured are people who diligently put in their hours each week in office cubicles, dry cleaners, manufacturing plants, and restaurants.

For nearly a century, health coverage has been the preeminent non-wage benefit that U.S. employers have used to recruit and retain employees. As Malcolm Gladwell points out in his August 28th New Yorker article, "The Risk Pool," such employee benefits set us apart from other industrialized nations, which have long offered coverage through their federal governments, guaranteeing coverage for all citizens and ensuring equitable financing of health care costs. By contrast, the U.S. system imposes extra costs on employers with older workers and large numbers of early retirees, as well as higher costs due to geographic variations in health care costs.

Over the past five years, the continuing growth in U.S. health care expenditures and premiums has made it increasingly difficult for employers, especially small employers and employers with older employees, to provide comprehensive benefits—or any benefits at all. Clearly, the U.S. system, which relies so heavily on employer-based coverage, is failing too many families.

Workers Without Insurance Have Few Affordable OptionsToday, workers without access to health insurance through their job are left with few affordable health insurance options in the private market, which is likely why there is so little participation in the individual market.

Some federal policymakers are trying to encourage individuals to "own" their own health insurance and take personal responsibility for their health spending. They are doing so by developing and promoting "consumer-driven health care," such as high deductible plans coupled with tax-preferred health savings accounts (HSAs). While consumer-driven care is marketed as a way to get consumers to rein in health care spending, shifting costs onto working families is not a good solution.

A new Commonwealth Fund report, "Squeezed: Why Rising Exposure to Health Care Costs Threatens the Health and Financial Well-Being of American Families," compares the experiences of adults ages 19–64 in the individual insurance market with that of adults with employer-based coverage. Using findings from the Commonwealth Fund Biennial Health Insurance Survey (2005), lead author and Fund assistant vice president Sara R. Collins, Ph.D., and colleagues reveal that working-age adults with employer-based coverage rate their health plans more highly than do adults with individual coverage. Compared with adults with individual insurance, people with employer health benefits pay less out of pocket for their premiums; face much lower deductibles; and spend far less of their income on health insurance and health care expenses.

The study also finds that adults with high deductibles with either employer or individual market insurance devote a substantial chunk of their income to health expenses and avoid getting necessary health care because of costs. Not surprisingly, these men and woman are also struggling with crippling medical debt, and express less satisfaction overall with their health care.

The fact is that HSAs won't help the uninsured or low-wage workers, a group for whom tax benefits are of little value. A 2005 Fund report showed that 55 percent of the uninsured are in a zero percent tax bracket. Additionally, the very ill—those suffering from heart attacks, strokes, cancer, mental illness, or injuries—are responsible for most of the nation's health care costs. As I've pointed out in previous columns, shopping for the best physician or hospital is impractical in such circumstances.

Create Savings, Not New BurdensSo how do we reduce costs? Instead of shifting health care expenses to consumers, we should work on achieving savings by providing efficient care. According to a Fund survey released in August, "Public Views on Shaping the Future of the U.S. Health System," two of five adults experienced inefficient, poorly coordinated, or unsafe care—such as a medical, surgical, medication, or lab error—in the last two years. Three-quarters of all adults surveyed said the U.S. health care system needs either fundamental change or complete rebuilding. Expanding insurance and controlling costs, respondents said, should be top priorities for federal action.

The troubling new Census Bureau numbers on the uninsured likewise reflect a system that has suffered years of neglect. It's critical that we as a nation close insurance coverage gaps by expanding employer-based coverage through pooling, eliminating the two-year waiting period for coverage of the disabled under Medicare, letting older adults "buy in" to Medicare, and building on Medicaid and the State Children's Health Insurance Program to cover low-income parents, young adults, and single adults.

Expanding insurance coverage does not have to mean that we abandon efforts to curb costs. We can simultaneously improve coverage and care and cut costs by investing in quality improvement in chronic care and transitional care; promoting information technology and shared decision-making; and rewarding high quality and efficient care through incentivized payment programs. In this way, we can recover from the collapse of the old infrastructure and build a new, stronger and higher performing health system.

As always, I'd like to hear from you. Send your feedback to kd@cmwf.org.

September 2006

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The mission of The Commonwealth Fund is to promote a high-performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society's most vulnerable, including low-income people, the uninsured, minority Americans, young children, and elderly adults.